Supreme Court Rejects Three-Year Damages Limitation in Copyright Infringement Case

Silver audio jack on a CD, linked to copyright issues and Sherman Nealy.

Copyright Infringement Cases: Sherman Nealy

Earlier today, the United States Supreme Court ruled in favor of Miami music producer Sherman Nealy in his dispute with Warner Chappell Music Inc. and others arising out of alleged copyright infringement by Warner artist, Flo Rida (aka Tramar Dillard). In a 6-3 opinion authored by Justice Elena Kagan, the Court held there is no time limit for copyright infringement damages in suits that are filed within the applicable limitations period.

Case Background

In the underlying lawsuit, filed in 2018, Nealy asserts his label Music Specialist owns the copyrights to the song “Jam the Box” by Tony Butler (aka Pretty Tony) and that Flo Rida included elements of the song into his 2008 hit “In the Ayer,” which sold millions of copies and reached No. 9 on the Billboard chart. Nealy claims Warner’s use of the song infringes his copyrights and seeks monetary damages dating all the way back to 2008.

Legal Framework

Under the Copyright Act, a copyright owner must bring an infringement claim within three years of its accrual. See 17 U.S.C. § 507(b). In some Circuits, courts hold that a copyright infringement claim accrues “when an infringing act occurs.” In other circuit courts, which apply what is known as the “discovery rule,” a claim accrues when “the plaintiff discovers, or with due diligence should have discovered” the infringing act. The Eleventh Circuit, where the underlying suit is pending, follows the discovery rule.

Historical Context

The facts in this case span decades. Nealy and his former business partner Tony Butler formed Music Specialist in 1983. After releasing one album and a handful of singles, including the works at issue, the collaboration dissolved. Shortly thereafter, Nealy served two prison sentences—from 1989 to 2008 and from 2012 to 2015. During Nealy’s incarceration (and without his knowledge), Butler entered into an agreement with Warner to license work from the Music Specialist catalogue, including “Jam the Box.” Nealy, who brought the underlying lawsuit in 2018, maintains his claims were timely filed because he did not learn of Warner’s infringement until 2016 just after he was released from prison and less than three years before he brought suit. And while Warner does not dispute the timeliness of Nealy’s claims, it argues that any award of monetary relief must be limited to the three years prior to the filing of the lawsuit based on the statute of limitations.

Court Decisions and Opinions

In reliance on an opinion from the Second Circuit, the District Court sided with Warner, holding that even when claims for old infringements are timely, monetary damages are “limited” to “the three years prior to the filing” of the lawsuit. On appeal, the Eleventh Circuit reversed this ruling. Based on a contrary Ninth Circuit opinion (rather than the Second Circuit opinion cited by the District Judge) the Eleventh Circuit held that a plaintiff with a timely claim under the discovery rule may obtain “retrospective relief for [an] infringement” even if that infringement “occur[ed] more than three years before the lawsuit’s filing.” In so ruling, the Eleventh Circuit specifically noted that the Copyright Act “does not support a separate damages bar for an otherwise timely copyright claim” and that ruling otherwise “would gut the discovery rule by eliminating any meaningful relief” for the very claims it is designed to preserve.

Supreme Court’s Conclusion

The Supremes agreed, upholding the Eleventh Circuit ruling. First, the Court looked to the plain text of the Copyright Act’s limitations period, which provides: “No civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued.” Based on this plain language, the Court concluded, this “time-to-sue prescription … establishes no separate three-year period for recovering damages.” Assuming without deciding that Nealy’s copyright infringement claims were timely, the Court noted that “any time limit on damages … must come from the Act’s remedial sections” and that such provisions of the Copyright Act include “no time limit on monetary recovery.”

In lock-step with the Eleventh Circuit, the Court remarked that the damages bar sought by Warner “makes the discovery rule functionally equivalent to its opposite … the accrual rule.” And while the Court declined to resolve which of the two rules should apply (the accrual rule vs. the discovery rule), it rejected “applying a judicially invented damages limit to convert one [such rule] into the other.” Accordingly, the Court held that if Nealy’s claims are timely (which was assumed), “he may obtain damages for them. The Copyright Act contains no separate time-based limit on monetary damages.”

For more information about copyright infringement defense and copyright protection, see the Klemchuk PLLC Industry Focused Legal Solutions pages.

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